Democrats Eat the Young: Minimum Wage Case in Point

One of the popular political idiocies of our day is the idea that minimum wage laws accomplish something good.  Apparently, many people think that if the minimum wage is raised, then workers with minimal skills or unproven skills will simply be paid more money.  The idea is that employers, who are imagined to have more money than the low skilled workers they might hire, will be happy to transfer some of their wealth to such a low skilled worker because of a government mandate on minimal pay.  Actually, it is apparent if you put yourself in the shoes of the struggling small business owner who hires most people that this will mean that riskier bets that someone is productive enough to justify the higher wage will never be given a job offer.  It is also apparent that if someone is given a chance, they will be fired very quickly if they prove unable to quickly become sufficiently productive. 

The sad thing is that most people making minimum wages are essentially in training so that they can become more productive and justify being paid a higher wage.  When the minimum wage is increased by law, fewer workers are accepted for training.  This is not rocket science.  This is really easy to figure out.  You pretty much have to be a Democrat and a Progressive to be so dense that you cannot figure this out.  Hmm... or is it that even they can figure it out, but they shut their eyes to the evil they do because they are so beholden to the labor union leaders?

The primary unskilled or risky group seeking jobs is teenagers.  So it is reasonable to expect that there will be a strong relationship between teenage unemployment and the minimum wage.  There is:

This plot comes from an article in the Wall Street Journal of 5 March 2010.  The blog CARPE DIEM presents the WSJ comments and discusses the issue further in an intelligent evaluation.

One of the interesting things this plots shows is that while the while each increase in the minimum wage results in an increase in teenage unemployment, that increase does not always shoot up instantaneously with the increase.  The rate of rise in the teenage unemployment rate does go up faster as the wage increase becomes greater relative to the average teenager's productivity.  The first wage increase was followed a bit slowly by the teenage unemployment rate.  Why would this be?  I expect it is because the teenagers already being paid the prior minimum wage amount in your employ have already acquired much of the skill or proven themselves sufficiently that they have already acquired most or all of the skills needed to be productive enough at the new wage level.  Rather than let them go, you will simply be more reluctant to hire the next trainee.  This means that the unemployment rate does not necessarily shoot up immediately.  But, our most recent minimum wage increase to $7.25 per hour does appear to have an immediate response in teenage unemployment.  This many be due the fact that very few teenage workers are productive enough to justify the $7.25/hour wage.  More actual firings took place at this compensation level.  This third increase in only a few years was to a level far too high for many teenage working neophytes to match with their productivity.

Minimum Wage Job Losses

As I noted on 18 July, the minimum wage increased to $7.25 on 24 July 2009. On the 24th of July, I heard on Fox News that some studies showed no loss of jobs due to minimum wage increases and some showed small job losses. I am sure that job losses result and I can see why they are hard to document.

First, they do not occur where the state laws already require as high a wage rate or higher than the new federal rate. Any losses that were going to occur in those locations will have already occurred.

Second, aside from a small number of severely intelligence-challenged and perhaps some with other disabilities, most people employed at the minimum wage are young and not well-educated. They are also either going to quickly lose their jobs because they are terrible employees or they are going to quickly learn enough to be given a raise. In other words, most minimum wage earners are on trial and in training. An increase in the minimum wage while they are in this status is generally going to have a small effect on the individual. If he looks bad, he may be fired a few days earlier. If he looks promising, the employer already has some investment in him in training and is likely to give him the minimum wage as opposed to firing him. He was soon going to get it anyway or was soon going to surpass it anyway. But, these effects on the already employed are hard to detect, since the only loss of jobs effect was maybe laying off a poor worker a few days earlier than he was likely to be let go anyway.

So, where is the effect? In many cases, the employer still needs to train people, so he is likely to start some people off at the higher minimum wage anyway. But, he is also very likely to be more selective. He will be less willing to give a chance to someone who does not initially present himself well or who has a previously unpromising employment record, but who now claims to have learned to take work seriously. The number of people given training will drop and the quality of those selected must be more assured. This means fewer second chances and less willingness to take a chance on kids from inner city rough neighborhoods. There is no other rational response to a minimum wage increase.

So, the main effect of a minimum wage increase is a decrease in new jobs created, a decrease in opportunities for uneducated kids from rough neighborhoods, and a decrease in the employment of people with severe disabilities. There are few changes due to people actually losing a job, except perhaps those with severe disabilities.

The Federal Minimum Wage Increase

In the midst of the worst recession in several decades, the federal government is about to carry out the third stage of a federal minimum wage increase from $5.15/hour to $7.25/hour on 24 July. In July 2007, it was increased to $5.85 and in July 2008 it was increased to $6.55. These minimum wage increases will contribute further to the unemployment which in June rose to 9.5% of the workforce. Why does the federal government interfere with the employment contract between a worker and an employer in such a manner? For that matter, why do many states also establish minimum wage rates by law?

Nannies argue such things as: A family of four cannot possibly be supported by a single wage earner being paid $5.15/hour so government must step in and force the employer to pay its workers more. Implicit in this argument, there is an assessment of the cost-of-living according to some standard held by the nanny and there is a failure to note the individual nature of the employee and the job in which he is employed. The employee may not have graduated from high school and if he did, he still may not know how to read or add and subtract numbers. The employee may not have an IQ of 100 or more, so his abilities may not be those that most voters imagine the employee may have. And, of course, the employee may have other means of support and just wants a few more spending dollars, or he may be looking for a good job, but needs whatever supplemental income he can get in the interim.

Then again, the employee may live in a community where the cost-of-living is very much lower than it is where the plurality of voters who favor a given minimum wage come from. Or, frankly, someone who wants a particular job in a particular industry may simply have to take what that industry can afford to pay in that area of the country. A lemonaide stand operated in New York City may be able to generate much more income per hour than one operated in Lance Creek, Wyoming. The lemonade stand in NYC may be able to pay $7.25/hour to the lemonade dispenser, while this may be a hopeless prospect in Lance Creek.

If there were a valid justification for government to interfere with the freedom of employment, it is clear that any minimum wage laws that might be justified should be established on as local a level as possible. Even when these are established at the state level, there will be huge cost-of-living differences across many states and great differences in the kinds of jobs available and the customers who will provide the income to the company providing the jobs. Lemonade stands in Cheyenne, Casper, and Yellowstone National Park may be able to generate much more income and pay higher wages than can one in Lance Creek. This is no reason to deny the people of Lance Creek jobs at a lemonade stand and lemonade as well! Yet, the many states with minimum wage laws do just such nonsensical things. Then we compound this extreme nonsense with the still more ridiculous nonsense of a national minimum wage law.

Why do we do this? Well, it clearly is not to address any actual concern for fairness to employees, since if such arguments as that they were unfairly treated by the free market forces of supply and demand were actually true, then these issues would have to be addressed by very local governments which could more nearly deal with the many different local conditions. I maintain that they should not attempt to do this because it violates the rights of both the employer and the employee, but even for those who have no concern for rights and moral behavior, but who do pretend to be pragmatic, the argument for a national minimum wage rests on quicksand.

The real reason for a national minimum wage law, and in many cases for state minimum wage laws, is so local governments can minimize the tendency of some businesses to locate in areas where the cost of living is lower. The high-cost-of-living states and locales are commonly suffering an out-migration of people and businesses to lower cost-of-living areas or at least they have slower growth rates. The governments have a particular interest in stopping this out-migration because in many cases they have had a major hand in increasing the cost-of-living in their areas. The areas with the higher cost-of-living, higher taxes, greater restrictions on business operations and new home building, tend to be dominated by the Democrat Party. These areas also tend to have higher population densities, which make it easier to pay service workers more than they can make in lower population density areas of the country. So, establishing a federal minimum wage requirement which is higher than the level at which some people in some parts of the country are willing to work in certain jobs, kills the competitive industries or retards their competition in those areas of the country.

In practical terms, the recent increases in the minimum wage retard the growth of companies in the South and in the Plains States and outside many metropolitan areas of the remaining states, in addition to eliminating jobs for many of the least skilled, commonly very young, workers in the many metropolitan areas where the city public school systems are a horrifying joke. This is an act of unbridled cruelty, dressed up as nanny compassion. This is the wolf under a sheep hide.

Once again, the progressive agenda is simply a transfer of wealth, jobs, and dreams from those with less political power to those with more political power. The big push for these federal minimum wage increases came from Pelosi (D, CA), House Education and Labor Committee Chairman George Miller (D, CA), and Kennedy (D, MA). In this case, it is clear that the Blue States are taking advantage of the Red States in an effort to keep the Red States from taking advantage of their lower cost-of-living, lower taxes, and better business climates. It is also clear that despite the great pretense, the Progressives do not care a fig for those they have not bothered to educate decently in their public schools in the many major cities controlled by the Democrats or for jobs lost to people who are less likely to vote for them. Furthermore, it is clear that whether people actually have jobs or not is much less important to the Progressives than is their quest for the power to control all of our lives from cradle to grave.

Let us all give a great big hand to the fascist Democrat Party which once again is destroying American jobs and hurting those with minimal jobs skills or opportunities, even as they continue the pretense of caring for the Little Guy, the Common Man, and the Disadvantaged. Once again, it is revealed that the Party of Mass Destruction is primarily motivated by a lust for power rather than a caring heart.

Democrats Create Unemployment Before Election

As preparation for the upcoming Presidential election, the Democrats have arranged for an increase in the unemployment rate. This allows them to claim that under President Bush the economy has gone sour and unemployment has gone up. For almost the entirety of President Bush's presidency, unemployment has been remarkably low. This would have been awkward for the Democrats going into the election. They fixed the problem by increasing the minimum wage! The unemployment rate has now risen to 5.7%.

Compared to the unemployment rates in the more socialist countries of Europe, this is a very low unemployment rate still. But the average unemployment rate in 2006 was 4.6% and it was again 4.6% in 2007. Such rates were very low and the July rate of 5.7% seems high in comparison.

In 2007, the minimum wage rate was $5.15/hour. The minimum wage law passed by the Democratic Congress has already raised the minimum wage rate twice, with the rate most recently raised in July 2008 to $6.55/hour. It will rise again to $7.25/hour in January 2009. Not surprisingly, teenage unemployment has risen by 2.2% to a rate of 20.3%. The rate for workers over 20 years old has increased only very slightly and it has actually fallen for women over 20. Ed Feulner, president of the Heritage Foundation published a commentary in the Washington Times on 26 August 2008 on this subject entitled "Rolling back government."

As I have noted before, raising the minimum wage rate is a sure way to cause employers to hire fewer young people, especially those with the worst educations and the worst job ethics. These potential workers are far more likely than most to come from families whom the Democrats pose as the champions for. These young workers desperately need the experience of holding a job and obtaining on-the-job training, but the Democrats deny that opportunity to them by insisting on raising the minimum wage rate by law. Over and over they have put under-educated and often under-parented young people out of work or made it extremely difficult for them to find work. These Democrats claim to be raising the minimum wage rate for everyone's good, but it is historically and thinkably clear that what they really do is put people out of work. They are busy preventing young people from getting the on-the-job training that they desperately need.

Why do they do this? Because it is an easy way to pose as do-gooders, since few people stop to think that you cannot evade the requirement that the worker must be able to earn the money he is to be paid. The employing company must make enough more money as a result of the hire to be able to afford the worker's pay, benefits, all payroll taxes and insurance, all capital costs, and all other overhead costs. Rules of supply and demand rule even if Congress tries to intervene. This is inescapably clear by now, yet Congress persists in a minimum wage rate fraud.

There is a second reason. Most people have an exaggerated idea that whatever happens under a president's administration is due to his actions, when outside of defense and foreign policy, it is really usually the Congress which has more impact on what happened. Sometimes, neither Congress nor the President were major causal factors, but the public tends to suppose that they were. Congress plays upon the idea that the President is responsible for all things economic by causing mischief when they want a poor economy to make it easier for them to get a Democrat elected President. Causing unemployment to go up by increasing the minimum wage prior to an election works great for this purpose.

Be wary of a lack of scruples in most politicians. People in this era of big government are too often drawn to politics by a desire to enjoy the powers of ruling and the ability to do so for their own gain. But above all, do not underestimate the unscrupulous nature of Democrat politicians.